Trade & Export ME - Country Focus - Malta by Trade Export

Country

focus

MALTA

INterview with the PRIME MINISTER

FOREIGN AFFAIRS

ECONOMIC OPPORTUNITIES

JUNE 2013

COUNTRY FOCUS Interview

A cut above the rest

During a press trip to Malta, we had the opportunity to meet the youngest Prime Minister in the EU – Dr. Joseph Muscat, and it was a refreshing experience to hear from this dynamic leader, his plan for his country. Malta has been doing much better than some of the European economies. What plans are there to keep that going and to remain sort of out of the fire, so to speak?

I want to reassure you that we are a resilient and strong economy and we will continue heading in that direction. Obviously we have all the challenges that any other country in the world faces because of the global financial crisis. But definitely we must say that we do think of ourselves that we don’t only have our head above the water but we are a cut above the rest. Right now we are going through a situation where we are actually stepping up. For example our anti-money laundering provisions - there’s capital that wants to move to our country and we are very conscious of that. This is not a tax haven - this is a reputable jurisdiction within the European Union and we want to keep it so. I think that the fact that throughout all this financial crisis, none of our financial institutions, none of our banks, have required any sort of government intervention shows that this is a resilient jurisdiction where the investment policies adopted by our institutions are sound. Figures show that we are in a very healthy situation. We’re not after a quick buck so right now we are stepping up our procedures to make sure that all the money here is legitimate money.

Right now in light of recent changes in the Middle East, and also with the Gulf states’ regional-political clout emerging faster and faster. Do you see yourself developing or strengthening

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any ties in the Middle Eastern countries and if so which ones? Yes, definitely. We like to think of ourselves not only as a European country but definitely as a Mediterranean country, so that brings in an African variation to all. We do believe that we have a role to play. That role would be extrapolated within four years when Malta will hold its first ever presidency of the European Union, which for us is a very

important step, because its unprecedented. We have only been a member of the EU for nine years and this happens once every 15 years. It also gives us the opportunity to influence the EU agenda for at least six months, where we can steer a number of policies. And definitely because of our strategic location in the centre of the Mediterranean, I think its natural for us to not only put a Mediterranean dimension but also to put a Middle Eastern dimension to

our presidency. There are a number of issues in which I think Malta can play a role. First of all as an honest interlocutor between different countries, as we’re small enough to be trusted. We’re a threat to no one and we’re proud of that. First I’ll talk about the Mediterranean context and then the Middle Eastern context. If you look around the area we are a stable beacon within an area of instability if you look southwards. And I believe that we can be that interlocutor that helps these new governments, these new states/ state institutions get their acts together. For example, in order to have association agreements with the EU. We have the experience of having been a first candidate of the EU, and now a member of the EU. One of the most successful when it comes to fund absorption and I think we can help when it comes to institutional ties over there. When it comes to the Middle East, we have history. Being very much involved in the Israeli-Palestinian issue, we are one of the first states in the world to recognise them. And we’re proud of those decisions that have been made. We’re very interested in the Gulf region and we also have interests in the new markets, in the new models being promoted over there. The energy sector that’s our top priority as a government. We are totally reliant on fossil fuels which is inconceivable for an EU state. So we’re moving away from oil to gas and then to renewables, and that is where we believe that there can be state-to-state, initiatives, which over the past few years have grown cold. One of the things that this government has put forward is that we have separated European affairs from Foreign Affairs when it comes to Ministry. Until now and over the past 15 to 18 years Foreign Affairs have been Euro-centric because of the exigencies. When we became a member state of the EU it absorbed a lot of energy and a lot of institutional capacity along with most of our efforts. So now, we have separated the European function which actually for us has now become almost a domestic policy.

Because quite a substantial number of laws are coming from the EU. We separated EU matters from foreign affairs function because we want our foreign affairs minister to concentrate more on relations with the Middle East which have been, I wouldn’t say neglected but because of other exigencies, have not been given the necessary focus.

Because of Malta’s strategic location, it is a gateway to Europe. What further steps are you taking to promote relations between Europe and the Middle East in terms of location? Well, I do believe, and I think that experience has shown, that this is a good strategy and that most of the enduring relations between countries are those based from people to people. Let’s say our historic relations with Libya for example- if they were based form government to government, businessbusiness they would have collapsed when the regime changed. Instead, the fact that they were based on a sincere mutual friendship and respect between the two people, nothing has changed for us in the sense that we’re still friendly with [them]. We should make business a lesser priortiy, the first and most important thing is to understand each other and to have a genuine interest in each other rather going to any other country and seeing what contract we can get and what we can sell. I think that can give you some results for some time, but it will be very superficial and it could be counterproductive at the end of the day. So the attitude that we would propose is a more long-term attitude that will see that there is a more genuine understanding of our countries.

Most countries have marginal and annual deficits, it has become a big concern especially in EU. In Malta what are the things you do to handle this? We as a European Union state member, are governed by a number of treaties which don’t allow us to run at a deficit which is more than 3% of our GDP. There might be issue every now and then on whether it is percentage more or

percentage point less. But our perspective is that there should be restraints on government spending but in order to have a realistic and durable deficit reduction programme you need economic growth. Without growth there can be no realistic reduction in the deficit because you can’t cut in the expenses after a certain extent. The real solution is to have new markets to look at growth and to look at new ways of doing things. We cannot just spend everything but we need to generate new markets. And I think Europe is coming around to that sort of attitude.

What are your plans for this country? What are the key areas for growth?

We are definitely looking at revamping our energy sector. The sector that has not allowed us to grow as much as possible in the non-financial services sector. It has undermined our cost-base so having a better energy mix would help us attract more investments. Apart from that we are very much interested in creating new jobs in the tourism sector, when it comes to quality tourism. The numbers are quite healthy over here. We are interested in penetrating new markets and not being solely dependent on mostly European markets, which is one of our challenges. Because of the visa regime, we want to try to find out new markets be it in the Middle East or elsewhere. We are also very much interested in the green jobs, mainly environment-related jobs. Finally, but not solely, education and health. I think we can say, and reports show, that the health technology used in this country is one of the most cutting-edge in the Mediterranean. I think we have some of the experts in various fields in the Mediterranean, operating from here. And that’s what we can promote for this region. I think we have some of the best health service in the Mediterranean. Also when it comes to education, many people from around Europe come to Malta to learn English rather than go to the UK or Ireland, because it’s a safer and cheaper place. I think that is a model that we can build up on. JUNE 2013

COUNTRY FOCUS Foreign Affairs

At the crossroads of civilisations The Ministry of Foreign Affairs serves a window to the world on what Malta has to offer. We caught up with Dr. George Vella, Minister of Foreign Affairs to get a better grasp on Malta’s political relationship with the GCC countries.

Malta can be considered as a gateway for GCC countries. At a policy level, what has been the strategy to engage GCC countries and is there a particular interest in the country? I have to say that, theoretically one would have expected and hoped that our relations and context with these countries would have been much deeper and much more fruitful. We’ve had relations established practically in the 70’s. I wouldn’t say that nothing much has happened, because there was a connection since there are a lot of these people who settled in these countries for work. With the Emirates - there are professional people who went there to exercise their profession, people who are in the financial sector and who have made a name for themselves. And today I know, that there’s quite a bit of community which gives a good name to Malta. And what I plan to do is try to build on these relations. We have an Embassy in Saudi since the 70’s. Infact we have an Embassy in Dubai since 2003 – that’s only 10 years ago, and we opened an Embassy last year in Kuwait. People who are as old as I am know that our country benefitted a lot from what was then known as the Kuwaiti fund, from which we got a lot of money to develop agricultural methods and irrigation methods in my country.

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Then there was a period when relations was not as fruitful and hopefully now we are trying all we can to work on those relations, see what the opportunities are. This is why I said in the beginning that as a Foreign Minister we have more time in our hands to dedicate to these relations. Today, our integration into the EU is settled, it is something that has happened practically 10 years ago in 2004. And thus, we move from there to discover, to try to find what opportunities we can work on and enhance between our country and this region.

Are there any political areas in particular you wish to strengthen with the UAE or more widely Gulf countries or Middle Eastern countries? Any countries in particular you want to focus on?

Well, when we have to explore the possibilities. Talking about BRIC countries is very in today. There’s no country in particular we are aiming at. Our relations with China have been growing from strength to strength. That is one country that we definitely have to explore all possibilities of cooperation plus, the connection is long standing, and there are many things happening already. I would also say Russia, because Russia today is a very

economically oriented and we have to use our Embassies to promote Malta’s culture, interests, investments, and traits. Because after all that’s what we’re after. We want to bring money to the country to make it peaceful and prosperous. But then again this has to be tied up with the foreign policies which will contribute to stability and security in the Mediterranean and the regions around us. Because, however wealthy you are, however good your finances are, if the environment around you is unstable then you’ll end up being affected by that. We’ve all had experienced what happened in North Africa these last three years, and whether we like or not, I mean I wouldn’t say that we are on the same boat, but the waves that they were creating were rocking our boats as well. Because people keep away from investments when they see that there is instability and we all know that investments need a stable political environment. So this is the basis of what we are doing. We’re trying to translate our relations, our foreign policy and our new connections into trade, into export opportunities and economic development. One thing which I have to say with the GCC countries is that, you have to understand

We’re trying to translate our relations, our foreign policy and our new connections into trade, into export opportunities and economic development. important country with whom we have to explore all the possibilities (but at the same time being careful not to have an impact like Cyprus had), because of its dominance in the banking sector. They are establishing their own strength on economic prowess around the globe. I mean, Malta is a small country, and we’re not thinking big, we’re not talking about influencing the world trade but being a small country, even a small drop or a small percentage of change is important for our economy. And this is the trust that we intend to give to foreign policy. We have to make it

that we are seen as a good interlocutor between the EU and Arab countries. In Malta we have set up also a European Union-Arab League Liaison office which was intended to try to facilitate the bringing together of EU Ministers and Ministers from the Arab countries. I cannot say that it has actually fulfilled its mission. I’m still critical that it could have delivered more, but then again we have to take it into the context of what happened. The current situation in Europe and the Arab spring sort of tipped the balance, and things couldn’t move on as smoothly as expected to. That office is still

Dr. George Vella, Minister of Foreign Affairs, Malta

open and we plan to use it to bring these two worlds together. We don’t believe in any clash of cultures or civilisations. We believe the Mediterranean is actually what tradition call as the ‘melting pot’ of these cultures, where they meet. Malta, has got the benefits today of being a member of the EU but at the same time it is also very much respected by Arab countries because we do understand the mentality. Malta is actually built on being at the crossroads of shipping civilisations and developments. So we still hope to keep and enjoy the respect of these countries. As I said this EU-Arab League Liaison office is very interesting instrument which could be used and hopefully if it is revived and given a certain amount of push we will see to it that we bring them closer and have more frequent contact between this two sides. Aside from that, I also have to say that Malta has participated very actively in any parliament reform that brought together countries from the North of Africa like Libya and Egypt with the EU. And Malta is very active, we have the history of being amongst the first people to speakup in this forum and we hope to keep that. So hopefully, we see more interest from gulf countries come to Malta. As we have investments, including the SmartCity, and also investments in the telecomm industry. Because as I said, it all boils down to creating wealth, creating prosperity stability and a happier population [nation]. JUNE 2013

COUNTRY FOCUS Economy

The path to prosperity Dr. Christian Cardona, Minister of Economy, Investment and Small Businesses, Malta, spoke to us about the advantages Malta has as an economy, which make it an ideal location for investment

r. Cardona started the discussion by highlighting the interests of Malta, “We are chiefly interested in creating more jobs in our country, and to create more jobs we need to have more networking internationally. And that is one of the first things that we embarked upon in these two weeks of coming into government – the structuring of government entity which works in the field of accepting foreign direct investments into Malta. We know that at this time, the climate internationally in the European Union and the Eurozone is not a very 40

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healthy one. But we believe that we can help Malta achieve more even at this time.” He further added, “I am sure that you know that Malta is a very friendly nation – As a new government, we have political stability, we have an army of people who are ready to work. And they are very skilled people, we also have language proficiency which gives us a competitive edge. We are working on our infrastructure. We are working on digital economy.” He also pointed out that the government believes in letting the private sector work. In the last five years, people from the

private enterprise have been telling us “Our problem is that, we don’t need subsidies, we don’t need your help. We need the government to let us work.” Dr. Cardona said that they are trying to decrease bureaucracy by 25%, and in the coming days they are going to appoint a specific person who is going to act as a commissioner for the simplification of government administration. According to him, the biggest concern businesses have is not finance and people but the bureaucratic challenges (duplication of work) which needs to be tackled.

Dr. Christian Cardona, Minister of Economy, Investment and Small Businesses, Malta

“Our message to the media, is mostly we are concerned with how Malta is seen at the moment by the international media. As you know, there was and there still is the Cyprus problem. Dominantly we have to distract and detach ourselves from the problems that they have in Cyprus at the moment. There was also a comment by the Central Bank Governor of Malta to the media, where he said that the two

resources, skills, friendliness and education which can make Malta excel as Malta. Out national identity is there and we cannot change it, so the fact that we would like to emulate what you did in your country, is a good comparison. But we have to keep our national identity.” He further added that every country has its own history and culture and therefore Malta needs to identify its sectors where it can excel. So what sectors can be attractive to Gulf investors? To this Dr. Cardona said that Gulf investors could be interested in large scale investments, such as the SmartCity Malta. Also, according to him manufacturing sector might not be of much interest to Gulf countries because of tax and labour laws in Malta, which are not as lenient as the Middle East. Secondly, investments coming from the Middle East could be those that could tap into the EU and use Malta as a base. “That is one of the examples, in retrospect I think is a typical example of what you are mentioning, it’s a huge pharmaceutical company and they intend to get into the EU. How? By using a jurisdiction which is in the EU already – Malta. To the Gulf we can offer our jurisdiction to a number of sectors. SmartCity Malta is a particular example of a larger side of investment (Dubai Holdings, SmartCity Malta and also the Telecom of Malta),” remarked Dr. Cardona.

Dr. Cardona said that they are trying to decrease bureaucracy by 25%, and in the coming days they are going to appoint a specific person who is going to act as a commissioner for the simplification of government administration. countries have different portfolios so you cannot compare Cyprus to Malta,” Dr. Cardona was clear to point out. When asked if Malta aspires to be the Dubai of EU, Dr. Cardona said that it’s good to be compared to success stories. “Geographically we have our unique location and we have our own natural

“I agree that we need to try and get our people here to open factories. But we can also serve as a jurisdiction leading to the European zone, and not only into the global and international markets. It’s one of our targets that we have to work on. Another thing that we have to focus on, is – we need to have people in our diplomatic mission,

who are there not only for diplomacy, they have to get their networking done. It is sensible for our country to have our diplomatic missions focused on trade, investments and on how they can attract people to our country,” was Dr. Cardona’s opinion. He also said that the Double Taxation Avoidance Agreement (DTAA) with the UAE, which was signed in 2009, has helped promote business and trade between the countries. However, he was honest enough to point out that setting up a business takes more time in Malta, than, say Germany or Singapore. For instance, it takes four times more time than Germany to get licences and more. As a result the parent company ends up taking the business to another country. “The unprecedented fight against bureaucracy has to start now and continue. There are too many steps and departments to start and expand a business and all this needs to be synchronised. We need to centralise and have a one-stop shop. We need an entity which will do this work in one go. We have to stop the duplication of work. Time is money. It’s a long-term plan,” something the new government intends to do according to him. It was pointed out that according to a report by HSBC, Malta’s trade is supposed to grow by 83% by 2020. Are there any other economic indicators which could highlight the growth for Malta? To this, Dr. Cardona said that Malta needs to achieve the European target for labour employment by 2020, which means it needs to have 75% of the working population to be employed. “We need to encourage female participation. 50% of our graduates are females but they do not join the workforce because they have to take care of the house. So we’ll work on providing them support, such as child care, so that they can come out to work.” On that note, we came to the end of our discussion with Dr. Cardona and it was easy to get positively influenced by his optimism and plans for the coming years. There is no denying, doing business in Malta will be easier and faster soon. JUNE 2013

COUNTRY FOCUS Tourism

The melting pot of cultures With its Middle Eastern and North-African influences, Malta is an amalganation of cultures and history. Aparna Shivpuri Arya got the opportunity to speak to the Minister of Tourism, Mr. Karmenu Vella, and got to know so much more than what meets the eye.

e began our conversation by asking him his opinion on how the Eurozone crisis has impacted Malta. To this the Minister said, “Even though there is pressure, I would say that Malta is the country with the safest and most progressive economy and we haven’t been hit that bad by the crisis. However, apart from pressure, there’s always a bit of anxiety while we wait to see what’s going to happen. Because although we are not directly affected by the crisis, indirectly obviously we will be affected as Malta depends a lot on external trade, whether its incoming tourism, or it’s outgoing exports. So, if our partner countries Germany, UK, Italy, and France and even the smaller countries [like] Greece are not performing well, indirectly we are affected.” Mr. Vella further elaborated on this and stated that Malta has one of the best financial regulations in Europe. “I wouldn’t say it’s a purely conservative approach but, it’s a cautious approach and we’ve always done things in a cautious manner because we’re a small economy. Perhaps a small mistake in a big country will not affect anything, but a small mistake in a small country might have disastrous effects. So that’s why we’ve learned over the years to tread cautiously wherever we go.” 42

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Karmenu Vella, Minister of Tourism

Moving on to the tourist influx, when we asked Mr. Vella how important is the Middle East to Malta as a tourist partner, he was quick to point out that even though in terms of numbers they are still at an early stage, there has been a steady growth. “I would say it’s very important, because we would like to have a mix of incoming tourists. And having tourists coming from the Middle East and the Gulf, would add to the mix of what we really want. In terms of the existing numbers, it’s still small but steadily growing. In terms of importance for us, I would say it

would be good if we would have more and more tourists coming from those areas,” he remarked. The Middle East market is also interesting for them for the number of expat families living over there as well. “So once we are marketing Malta in the Gulf and Middle East we would be targeting even those Europeans who are living there,” Mr. Vella highlighted. His colleagues at the Ministry added to this and said that Emirates is increasing its flight capacity to Malta and now with daily flights it has made it easier for people from Malta to get to the Gulf and beyond and vice versa. “The success of what’s happening in Dubai is important to us, because of the addons that we get beyond Dubai. Obviously, if we don’t have a successful operation with Emirates [airlines], then we risk losing the UAE. This means we will lose the Middle East market and the market beyond that, so we are looking at it in a much more global way. And the MICE business is an area that is particularly interesting, and in the last few months the visa situation has improved. There’s now a much simpler way for people to be able to come to Malta, so again that will facilitate traffic in terms of tourism and MICE business,” they stated. One cannot help but notice the Arabic influence in Malta, so obviously we were tempted to ask if there is a specific strategy for targeting the Gulf families visiting Malta? To this Mr. Vella smiling said, “Lately, I had some friends come over and the first thing that impressed them was the language culture and they started picking up Maltese. The reason is that, because our language is the only language which has an Arabic origin and written in Roman letters. I would say that grammatically our language is still 95% or even more Arabic.” “And as a destination we are a safe destination. We have extremely low crime rate so people feel safe here. And what we’ve noticed as well is that the Muslim families tend to travel even with children and families. And they want to feel that it is safe for them to bring their children so that notion of safety is very important.”

Malta also scores over other tourists hotspots like Cyprus and Turkey, with its “year-round” perfect weather. Also when people come here for business, they are able to cover a lot of meetings in a day because of the short distances, something that won’t be possible in a big European city. The Minister also spoke about education tourism, “We’ve got a good number of English schools. We’ve got one of the best Universities in Europe and a good number of incoming students who actually stay on the island for months, and those who take full-time courses here as well. I think that is one area where people and families from the Middle East and the Gulf would feel safe, sending their children over here.” He also pointed out that Malta offers good value for money and always scores very high on product, quality and standards. He also agreed that Malta is an untapped destination.

“In fact believe it or not, there are even some European countries where awareness about Malta is still a big question.” Malta also scores over other tourists hotspots like Cyprus and Turkey, with its “year-round” perfect weather. Also when people come here for business, they are able to cover a lot of meetings in a day because of the short distances, something that won’t be possible in a big European city. Moving on to the government’s priorities for the tourism sector, Mr. Vella said, “Tourism in Malta has always been a top priority mainly due to the fact that

tourism contributes directly about 30% to our economy. Added to that is the fact that the effects of the tourism industry are immediate. Because the tourists are spending in souvenir shops, in restaurants, so the interaction between the tourists and the Maltese in economic terms is much faster. That’s why we give a lot of attention. Plus the fact that most of the investment in Malta, when it comes to hotels especially, are all 100% Maltese investments. So again, that’s why it is a top priority.” Also Malta they has a fully-fledged Ministry of Tourism incorporating amongst other things aviation, national airlines, tourism institutes, culture and heritage under one umbrella. The government is doing a lot to entice more investments from the private sector, to be channeled into this sector. It does a lot and spends a lot to market the Maltese products overseas with so much effort being put, it’s time to explore this mystic country. JUNE 2013

COUNTRY FOCUS Malta Enterprise

The right investment destination Malta Enterprise (ME) is the national development agency responsible for promoting and facilitating international investment in the Maltese Islands by offering investors excellent business opportunities and tailored services. As part of a press delegation, we got the opportunity to know in detail about the work being done by the organisation.

alta Enterprise is also responsible for the growth and development of Maltese enterprises both locally and beyond their shores. The government tasks Malta Enterprise to do all that needs to be done to attract more investments in Malta. That means, it administers the incentives that the government of Malta provides. Additionally, it also allocates industrial space in Malta, such as factories as well as industrial space within the Aviation Park and other parks dedicated to other sectors. Also, apart from managing the incentives, they also manage all the industrial properties in Malta, such as factories and also the 44

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Safi Aviation Park and all the other parks dedicated to various sectors. Malta’s interest in the Gulf region is on two points. First, the general value proposition - the general investment climate in Malta is cheaper than most European Union countries, and provides an interesting proposition for companies who are coming from the Gulf. But it is also because Malta is developing certain areas. For instance, the SmartCity Malta, which is being developed by TECOM, is a 100% private investment. Malta Enterprise is also interested in investment houses, particularly situated in the Middle East, to engage with them on their interests in these kinds of specific

developments. Malta has a commitment to develop the life sciences sector. Basically in in the last 15 years, the country has already become a center for manufacturing of generic pills and manufacturing of medical devices. So, the tubes used in drip sets for incubators for babies, in a lot of Middle Eastern countries, are actually designed and manufactured in Malta. Why Malta? Top ten reasons to invest here • Pro-business government with easy access to decision makers; • Nimble economy; • Political and social stability;

• • • • •

Highly skilled English-speaking workforce; International finance centre; Excellent ICT infrastructure; Advantageous corporate tax system; Strong work ethic and high productivity levels; • Easy access to and strong diplomatic and trade relations with North Africa and the Middle East; • Safe and pleasant lifestyle. While tourism and manufacturing take the major chunk of GDP, financial services and ICT sector are very important to Malta. Manufacturing still accounts for about 13% of their GDP.

ICT A lot of development has happened in the ICT sector in the last 15 years. Among others, Malta has 10% of the global players in online gaming. This is in itself a demonstration of the good connectivity of Malta. Given that players have very low tolerance towards slow and unreliable connection. The fact that such companies are in Malta, demonstrates the advanced of the ICT infrastructure. But apart from that, Malta has major companies that have come from the Middle East. For instance, TECOM, the operators of the Dubai Internet City are heavily present in Malta. They have built the SmartCity Malta which is a self-sustained town in IT and media industries. This also demonstrates the kind of value proposition Malta has for companies based in the Gulf. Companies based in the Gulf can use Malta as a Eurozone stable economy to tap not only the European market but also to serve as a hub between Europe and North Africa. Malta is looking for companies in payments and financial services such as, e-commerce and so on. Among others, Malta Enterprise is trying to combine the strength of Malta as a financial services center and the strength of Malta as an IT hub to try to go for companies that are involved in this area.

Maritime sector There is no denying that Malta is known internationally mostly for the maritime sector. It has the largest ship register in

the EU and one of the largest globally. That means that their presence on the maritime landscape in general, including their participation in the International Maritime Organisation, is very active. Again, Malta happens to be in the middle of a very busy area, of not only for commercial vessels but also, for passenger ones. From the maritime area Malta Enterprise will now aim to go to the next step by trying to attract activities such as – designing, testing and manufacturing of nautical instruments. Malta is a good base for these things not only because of the location but also because of the education system and how it is set up. Besides shipping companies, such factors are also important when targetting companies involved in the oil and gas industry. In fact the other sector in which Malta Enterprise is trying to attract investment in is energy – mostly oil. The strategic location of Malta and the availability of skills at a good price would position the country favourably for maintenance and servicing of equipment that is typically used in the oil and gas sector. With what is happening in North Africa, Malta has an emerging market practically on its doorstep. So, while Malta Enterprise is also keen about Brazil, China and other emerging markets, they have not forgotten that they have an emerging market that is very close to them and which can offer a wide range of opportunities, particularly thanks to the good diplomatic and commercial relationships Malta has with its neighbours in North Africa. Aviation Aviation is an interesting area as well. Lufthansa has built around a cluster in aviation which besides a number of small operators also comprises operators such as Medavia and SR Technics. The latter is owned by Mubadala (majority ownership). Malta Enterprise is also talking to conversion facilities – companies that do conversions on aircraft. And, they are also trying to develop Malta as a manufacturing base for aviation components. Of course training, is also an interesting area because of the huge demand for training for pilots and so on. It is evident

that Malta is strategically located to be able to offer good courses on international standards with prices that are substantially cheaper than that in Europe. So to summarise, Malta’s value proposition: • Malta has the stability but also, in Malta Enterprise’s opinion, the most competitive tax system in the European Union. Through this system, which is fully sanctioned by the European Union, companies do pay a corporate tax rate of 35%, but then upon distribution of dividends they receive refunds which effectively means that international shareholders only pay 5% tax in Malta, which is cheaper when compared to other European countries. • The fact that people in Malta are skilled and speak English • And at the same time the competitive cost structure of operating in Malta in general tends to be cheaper than that in Europe.

There are no restrictions on the number of foreigners who can be employed. As Malta is a part of the EU, there is free movement of people from the entire region. People coming in, from third countries not from European Union would typically require visas and actually one thing that Malta Enterprise is trying to do is to facilitate as much as possible the issuance of visas. But in terms of policy rather than procedure. Malta is very much aware that in certain sectors it cannot sustain by employing locals only. So the government has adopted this approach of being as open as possible towards expats. Experts from Malta Enterprise highlighted the GCC countries are mostly interested in IT and Education. The challenge is that a lot of times in GCC countries you have companies that are let’s say, not indigenous. So they will be international companies with an important regional sector in the GCC, and with those companies Malta struggles, because of decision makers in those companies. And Malta Enterprise is after indigenous companies who can decide themselves and they can engage with. After getting to talk to Malta Enterprise, it was evident that Malta is serious about business! JUNE 2013

COUNTRY FOCUS Finance Malta

Secure your investments:

Look at Malta! F

Finance Malta was set up in 2007 as a public- private partnership to promote Malta’s International Financial Centre. We bring you the details of the banking sector of Malta and what options are available to investors.

inance Malta is a member based organisation with 200 corporate members from various financial services sectors and 53 affiliate members from other complementary economic sectors. The organisation has a two-pronged remit: • Strengthen Malta’s financial services brand through a comprehensive communications programme • Create networking opportunities for its members. Finance Malta aims to: To assist practitioners to market the Malta concept and advantages (financial or otherwise) in order to attract foreign direct investment in the following areas: • intra group financing operations (group treasury); 46

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• international trading operations - managing the administration/logistics of a company’s exports; • holding companies for EU/non-EU subsidiaries; • location for intellectual property so that royalties flow to and from Malta; • holding overseas immovable property; • investment portfolio/trading; • back office operations and call centres; • services connected with the aviation sector such as private aircraft management, aircraft leasing operations, aircraft financing; • the attraction of Malta to captive insurance companies, insurance companies, back-office insurance services and insurance out-sourcing;

COUNTRY FOCUS Finance Malta

Professional Investors Fund: Key Features Experienced

Qualifying

Extraordinary

Leverage

100% of NAV

Unlimited

Minimum investment

Euro 10,000 or currency equivalent

Euro 75,000 or currency equivalent

Investor Eligibility Criteria

Yes

Investment Restrictions

Yes

None

Regulatory Reply Timeline

7 days from submission of full documentation

3 days from submission of full documentation

Self-Managed Scheme Structure

Yes

Source: Finance Malta presentation

• the attraction of Malta as a domicile for investment funds in the provision of administration and investor services • the promotion of the local capital market by attracting overseas companies/ institutions to list their financial instruments on the local market and the provision in Malta of trading, clearing, settlement and custody services in respect of financial instruments; • other services offered by the financial services sector; and • Other consultancy, management, planning, estate agency and other ancillary services in support of and conducive to the practical needs of operators within the financial services sector in Malta.

According to Finance Malta, the country has a fast growing funds sector. Kenneth Farrugia, Chairman, Finance Malta, said that there are 530 funds, 109 investment service licences, 27 fund administrators and six custodians. He further added that Professional Investor Funds are very flexible in Malta. Funds can be set up as an investment company, a limited partnership, contractual fund or a trust. Investors have the option to choose from three classes of PIFs aimed at various investor profiles ranging from quasi-retail to institutional investors. It is evident from the graph above that financial services and tourism remain the key sectors driving Malta’s growth. Talking about the key operational factors that contribute to Malta’s success, Kenneth said, “Comprehensive regulatory and 48

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Source: Malta’s Attractiveness Survey 2012

Kenneth Farrugia, Chairman Finance Malta

legal framework, strong presence of legal, audit and accounting expertise coupled with highly developed infrastructure has contributed to Malta’s growth.” He also

pointed out that Malta is very committed to making investments in a strong national educational system, which has resulted in a highly qualified workforce having a very strong work ethic. It is interesting to know that Malta is not dependent on any one country, when it comes to the banking sector. It does have a large banking sector, now boasting 27 units. But domestically it is dominated by two relatively large banks, Bank of Valletta and HSBC Bank Malta, and both these banks have a very extensive deposit and asset base. The two banks’ overall conservative approach, much encouraged by the regulator, has paid dividends in terms of maintaining the stability of these institutions. So it is unfair to compare Malta to Cyprus because the similarity ends with both being islands and members of the EU.

COUNTRY FOCUS Investment

Make a “smart” move!

SmartCity Malta is the brainchild of a joint venture between Malta and SmartCity. We visited the facility to get a first-hand experience of this amazing collaboration.

nvesting in SmartCity Malta translates to investing in a powerful global network of knowledge-based townships, which gives enterprises unprecedented access to a variety of important global markets. SmartCity Malta empowers businesses with reliable state-of-the-art ICT and social infrastructure, a host of IT, media and production services and partnership opportunities across all SmartCity sites. SmartCity is a conglomerate promoted by Dubai Holding member, through TECOM Investments, to develop and manage Knowledge Industry Townships worldwide. In Malta, SmartCity is the country’s largest knowledge based cluster. It forms a part of the ambitious vision of positioning Malta as centre of excellence for companies aiming to operate in the European and North African regions. 50

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Software firms from various countries like China, and the US, that require sophisticated sales engineers from regional European businesses have flocked here, leveraging on the English-speaking workforce at a cost significantly lower than other English-speaking countries. SmartCity Malta, in conjunction with the Government of Malta will also be providing the services of the Government Services Unit (GSU), a single window clearance for business partners to benefit from. This Unit will provide a comprehensive range of administrative services required for setting up and running a business at SmartCity Malta. It will also help in fast tracking the process of procedures such as work permits, residence visas, trade licenses and more. SmartCity Malta also leverages on the network of business parks in Dubai such as

Dubai Internet City, Dubai Media City and other global networks to get to know their experiences and share it locally. No other business park can pride itself for having such an international network of business clusters and with such a wide array of industry groups - media, technology and education among others. SmartCity made a direct investment of EUR 35 million in SmartCity Malta, which now brings up the company’s capital to EUR 66 million confirming the company’s commitment to the Malta project. On completion of the second phase, the lagoon area and retail buildings will provide a perfect setting with the Mediterranean Sea as a magnificent backdrop to be enjoyed by all those who visit and connect with SmartCity Malta That would be a smart move indeed!